PPP is not the final say in economic strength, what it really means is how much purchasing power a currency has in its own domestic economy , ie: within China proper, the moment the Yuan crosses the boarder, currency exchange rates and status comes into play, which means what 10 yuan buys in China buys alot less in say South Korea. What is more the US is home to most of the world's currency reserves in gold (8333 tons), which means alot as most currencies in the world is fiat based.It is this status and trust that grants the dollar it's status.
But then I must also add in the caveat that an economy's size only means something if it is actively tapped into, the more easily understood notion of this is how many countries have a particular country as their largest trading partner.
PPP is not the final say in economic strength
PPP is a more accurate measurement of a country's economic output, because it is not distorted by currency exchange rate manipulations which is widely pursued by almost every market participant for his own purposes. The major problems with PPP are that it is difficult to measure and difficult to apply. If you think China's economic output shouldn't be higher than that of the US, you can simply compare key economic measurements. For instance, China produced and consumed roughly 7 Trillions watts electricity in 2018, but the US produced and consumed roughly 4 Trillions watts electricity for the same period. You can't be the world's largest economy without the largest industrial energy power source! In all key economic output measurements, China is about 30% higher than the US, except probably only one measurement, that is, how much money has been manipulated which, of course, is the dollar's home game.
What is more the US is home to most of the world's currency reserves in gold (8333 tons),
What are you trying to say? Do you know the US had more than 22,000 tons gold at the Breton Woods Conference in 1945? Do you know that the US had promised to everyone in that meeting that the US would keep this amount of gold intact as a requirement for the dollar as the world reserve currency? Because of the Korean war and Vietnam war, other countries lost their faith to the dollar, they quickly dumped their dollar for gold, which Trump probably would claim they 'stole' almost two thirds of US gold reserve. If the US honored its obligation to allow people to exchange their dollar with gold, the US would have zero ounce gold left in 1971. In this sense, the US is a habitual, repeated financial defrauder.
Let's do some simplified math to see what sense can the 8000 tons US gold reserve make today.
One metric tonne = 32,151 troy ounce
8,000 tons gold = 257,208,000 oz gold
One ounce gold = $1500
8,000 tons gold = $1,500 X 257,208,000 = $385,812,000,000 = $386 Billion
The US gold reserve is worth only $386 billions, about 50% of one year's US military budget.
With $22 Trillions debts already on book and at an enlarging speed of $1 trillion a year during Trump admin., 8000 tons gold reserve is a peanut for the US effort to salvage the dollar if people decide to dethrone the dollar.
an economy's size only means something
Real economy size means life and death for a country that has enemies. You do need your real economic activities, not just Wall street monetary manipulations, to produce enough guns and bullets to sustain your war efforts. Not everything is purchasable for a country at war.
Real economy size also means life and death to the dollar. One of the arguments that the US presented to the participants of the Breton Woods Conference in 1945 was that the US had the largest economy in the world, therefore, its dollar should replace the pound sterling to be the reserve currency of the world. Now that the US real economic size is much smaller than China's, it is at China's goodwill to decide when and how to dethrone the dollar.